Bitcoin Mining Triggers Backlash From Electric Utilities

A growing number of utility companies are trying to rein in the sale of electric power to bitcoin mining operations in the United States and Canada.

Last week, utility regulators in Chelan County, Washington suspended applications for electric service from server farms focused on cryptocurrency mining after reviewing impacts on utility operations from existing loads and applications for service.

Located east of Seattle in Washington State, Chelan county has a population of only 72,400 people but also boasts among the lowest electric power rates in the United States.

Bitcoin mining is extremely power intensive. Indeed, electricity prices are among the primary factors that determine the profitability of a bitcoin mining operation.

According to Coindesk, “miners have sought out cheap power wherever they can find it in the world.”

Until last week’s decision to put a moratorium on new applications for electric service, bitcoin miners trying to set up server farms in Chelan county were requesting as much as 100 megawatts of electric power service.

Chelan county has dozens of cryptocurrency mining customers operating server farms – some legally and others illegally. The explosive growth in electric power demand from bitcoin mining server farms is reportedly threatening to overwhelm the county’s electric grid capacity.

Safety concerns have led authorities to curb crypto mining operations, especially in residential neighborhoods where servers are located in homes without the grid equipment needed to serve heavy load.

Bitcoin mining uses the computing power of servers located at data centers to solve complicated equations on the bitcoin network. For every equation solved, the mining operator receives an electronic reward of bitcoins. The key to profitability if the difference between the cost of solving the equations and the value of bitcoin.

Cheap electricity is the attraction for locating bitcoin computers in north central Washington. Some of the lowest electric rates in the nation come courtesy of dams operated by several local public utilities.

In mid-March, state utility regulators in New York approved a significant increase in the price of electricity sold to bitcoin miners.

In a decision issued on March 16, the New York State Public Service Commission said that upstate municipal power authorities could charge higher electricity use for cryptocurrency mining businesses.

“We always welcome and encourage companies to build and grow their businesses in New York,” said New York State Commissioner John Rhodes in a press release. “However, we must ensure business customers pay an appropriate price for the electricity they use. This is especially true in small communities with finite amounts of low-cost power available. If we hadn't acted, existing residential and commercial customers in upstate communities served by a municipal power authority would see sharp increases in their utility bills.”